The Coronavirus pandemic has caused untold disruption across the world. People’s lives and livelihoods are being affected in unprecedented ways, and governments are taking drastic measures to control the spread of the disease. Against the background of the huge threat to life, sport somewhat pales into insignificance. Yet sport forms a crucial part of modern life, and those involved in sport have their own legitimate concerns.
Rugby has already felt the effects of the Coronavirus, with all professional competitions suspended or cancelled globally. In England, the RFU have announced the cancellation of all rugby competitions below Premiership level, while the Premiership has been suspended until at least 14 April. Premiership Rugby are desperately trying to find a way to resume the season, but the toll is already telling on both clubs and players.
The issue for clubs is that without any games being played, their revenue is greatly reduced. Match days bring in revenue from ticket sales, food and drink sales, merchandise, parking and broadcasting. In the Premiership, though it appears that BT Sport (the exclusive live broadcaster of the league) have not suspended broadcast payments, most clubs already operate at a loss and may not be able to afford to go without the essential match-day revenue. As such, clubs have sought to make cuts to their wage bills in a bid to limit the damage to their balance sheets. It has been reported that all Premiership clubs are to impose a 25% wage reduction on players and staff, above certain salary thresholds. There have also been suggestions that a number of players wish to contest this decision.
This article will consider this policy from an employment law perspective, and will consider what effect, if any, the cancellation or postponement of competitions might have on playing contracts, focusing particularly on the question of frustration. This is likely to be the first in a series of posts about the legal implications of Coronavirus for rugby.
Wage Reductions
A player’s salary will be a term of their contract of employment and, therefore, the imposition of a wage cut of any size amounts to a breach of contract, unless it is agreed between the employee and employer. Such a breach could lead to debt claims for the contractual amount owed, as well as potentially for constructive dismissal (both wrongful and unfair). It might even be possible for a constructive redundancy situation to arise. The players therefore do not have to accept the unilateral imposition of pay cuts reported.
A significant reduction in pay will breach not only the express terms of the player’s contract but also the “implied term of mutual trust and confidence” such that the player would be entitled to resign and claim “constructive dismissal” (Mostyn v S and P Casuals Ltd). Indeed, the case of Industrial Rubber Products v Gillon [1977] UKEAT IRLR 389 suggests that a pay reduction need not even be significant for constructive dismissal to arise. This would allow an employee to bring a claim for both wrongful and unfair dismissal.
A (common law) wrongful dismissal claim would allow the contractual amount to be recovered for a period equivalent to the player’s notice period (i.e. the remainder of their fixed term – Reda v Flag), subject to the duty of mitigation. An unfair dismissal claim, under Part X of the Employment Rights Act 1996 (“ERA 1996”), would entitle a player to compensation. If a player could establish a constructive redundancy, they would be able to claim for a statutory redundancy payment (s.135 ERA 1996). A player might not actually need to resign to bring such claims (Alcan Extrusion v Yates), and it would certainly not be in their interests to do so at this time – unless, of course, they had an offer to join another club, in which case they could do so on a ‘free transfer’.
Alternatively, a debt claim could be brought without resignation, while there are also statutory provisions allowing claims to be brought in the employment tribunal for deductions from wages (ss.13-27 ERA 1996). I have discussed these scenarios in greater detail elsewhere – see here.
However, such claims would realistically serve nobody’s interests at this time. Indeed, accepting a temporary pay cut may be in the players’ best interests, as it contributes towards securing their long-term employment. Rugby is already in a precarious financial position and there is a risk that clubs could go under if action is not taken in the face of this crisis. These are unprecedented times and players, like everybody else, may have to accept that unprecedented measures must be taken. Players who are soon to be out-of-contract might legitimately be concerned about losing out most, but even they have an interest in clubs’ continued survival.
It appears that the Rugby Players’ Association (“RPA”) have been involved in negotiating this pay cut – which is to be welcomed – but, given that the prospects of resuming play any time soon are fast dwindling, players perhaps ought to be grateful that the reduction is only one of 25%.
Of course, it is also worth noting that clubs are likely to be making use of the Government’s Coronavirus Job Retention Scheme which will allow clubs to claim 80% of a player’s monthly wages up to £2500. However, they can only do so in respect of players who are “furloughed” – i.e. players who are performing no work for the club. In spite of what is argued below, it is likely that clubs will readily be able to satisfy this threshold, as players are not performing “work” per se.
Lastly, it is worth mentioning that these wage reductions are likely to ensure that clubs fall well under the Salary Cap this season – which might be a blessing for some – though any payment made by virtue of the Government Scheme will fall within the meaning of “Salary”.
Postponement, Cancellation and Playing Contracts
One question that clubs might be pondering is whether the Coronavirus might release them from their obligations to pay players at all. Could there be an argument that playing contracts would be ‘frustrated’?
The English contract law doctrine of frustration allows parties to be discharged from their contractual obligations where these become impossible to perform due to an unforeseen event not caused by either party, or where the event makes performance so radically different that the obligations are effectively incapable of being performed (Davis Contractors v Fareham UDC). This would release players from their contracts and would allow clubs to stop paying them.
Nick de Marco QC has written an informative piece on this doctrine and the way it might be applied in sport to the present circumstances (see here). As he explains, the courts will not invoke frustration lightly – impossibility (or incapability) is a high threshold. It is a somewhat uncertain area of law and, thus, clubs would be taking a significant risk in relying upon the doctrine to allow them to take drastic action.
Of course, when considering whether the Coronavirus will be a frustrating event, what we really mean is whether the cancellation of the season by rugby’s governing bodies will be a frustrating event. This analysis also assumes that playing contracts do not contain a force majeure clause – which they may do. Such a clause, depending on its drafting, would suspend or discharge the parties’ obligations, achieving the same result as frustration but without the uncertainty. However, the RFU’s standard Premiership playing contract contains no such clause.
Many playing contracts will be for a fixed term of more than one year. Thus, many contracts will continue after the conclusion of the current season. Such contracts will certainly not be frustrated by the cancellation of this season – though there might be a pause in the normal course of a player’s employment, this will resume and, thus, the contract, construed as a whole, will not be impossible to perform. For the same reason, postponement of the season will not frustrate playing (and other) contracts. This is why most sports governing bodies have, so far, only moved to postpone competitions. Delay in performance does not necessarily lead to frustration (Pioneer Shipping Ltd v BTP Tioxide Ltd [1982] AC 724).
Might it be different for contracts due to expire at the end of the 2019/20 season? If the 2019/20 is, or has been, cancelled, it might be arguable that such playing contracts have been frustrated. At a basic level, rugby players are employed by clubs to play rugby. Their fundamental contractual obligations are to play and train for the club. Rugby is a team sport and, therefore, it could be argued that if cancellation of the season and the wider restrictions put in place by government mean that those players with contracts expiring this season can neither play nor train with their teammates ever again, the performance of the player’s obligations as a rugby player may be impossible and thus their contract frustrated.
However, it is suggested the better view is that playing contracts would not be so frustrated. A player’s obligations extend beyond merely training and playing rugby – and, in any event, individual training will remain possible. The modern elite rugby player is a brand ambassador and is essential to the continued generation of revenue for a club throughout this time without matches, as well as to ensure a stream of revenue when play finally resumes. The sale of merchandise is likely to be a club’s only real source of income in the immediate future, and players are key to advertising that – and to maintaining goodwill in the brand.
A good example of this is the way that Wasps players have been publicly engaged in the #MakeThatCall initiative, phoning fans who might be isolated, as well as doing live Q&A sessions and social media takeovers online. Players are being used actively to maintain fan engagement and to generate goodwill towards the club. This forms part of their employment and, thus, would point away from a player’s expiring contract having been frustrated. This view is consistent with the narrow approach necessarily taken by the courts to frustration and reflects a policy of protecting employees who may be in vulnerable positions relative to the positions of their employers.
That said, the argument might be weaker in the lower leagues, where players have no real role to fulfil, other than perhaps continuing with individual training.
A final point to make relates to clubs’ abilities to release players. Terminating contracts might be seen as one way to reduce the wage bill in the event of cancellation. However, as seen with Saracens’ failure to become compliant with the Salary Cap Regulations (here), this is not always an easy option, with employment law placing extensive obligations on employers to dismiss players lawfully. Playing contracts without notice clauses would leave clubs in no better position – as they would be obliged to pay out the contract in full – unless they could negotiate a settlement. The second part of my article ‘Saracens and the Salary Cap – Part III: The Legal Implications’ considers this issue in detail.
Conclusion
The Coronavirus pandemic is set to throw up a vast array of legal issues across the world of sport. The doctrine of frustration is likely to be central to many of them, whilst employment issues are also likely to surge as employers scramble to save money and keep afloat.
The Premiership’s wage cuts are likely to be the first of a series of measures necessary to keep the clubs alive, and it seems right that players should accept them to secure their future employment. Meanwhile, the postponement of the Premiership will not release clubs from their obligations to players. Cancellation is similarly unlikely to have this effect; though in certain cases it might be arguable that it should.
The Premiership’s precarious financial position is being brought sharply into focus by this global crisis, and it is hoped that all involved in the league will do what is right – and what is necessary – to keep the sport afloat whilst doing right by the players, and respecting their welfare. The clubs, the RFU and the RPA must work together plot the path forward.